SDG 13 - Climate action

It will be necessary to reorganise every area of life – from energy production, to transport and agriculture, to building construction – if we are to substantially limit global warming. Large investments will be needed; the Intergovernmental Panel on Climate Change has estimated that around USD 2.4 trillion will be needed in the energy sector alone. In addition to proven instruments, innovative instruments will also be necessary to mobilise these funds. KfW works with these instruments, such as funds for green companies or insurance against consequential losses from extreme weather conditions due to climate change, such as the African Risk Capacity (ARC). KfW also issues green bonds, which are bonds that attract private capital. The proceeds are used for investments in climate-friendly projects.

To make the financial world greener, KfW participates in associations with other financial institutions like the International Development Finance Club (IDFC). This has brought together 26 development banks with a joint vision of a sustainable future and less poverty throughout the world. Between 2015 and 2019, they provided a total of USD 867 billion for green financing.

In addition, KfW set itself the goal of positioning itself to be even more sustainable. It developed the “Roadmap Sustainable Finance” for this purpose and defined specific steps to implement it, including measures like anchoring the SDG contributions and Paris Agreement compatibility even more thoroughly into its financing. 2020 also saw the introduction of climate mainstreaming in KfW Development Bank. This means that all climate effects and risks will be analysed at the early design stage of every project so that these can be systematically accounted for in the project design. In this way, the project’s effectiveness in terms of climate protection can be further increased and possible risks can be addressed more effectively. Risk-mitigating measures can thus be even more deeply integrated into the entire FC portfolio.

Today it is no longer possible to think about development without taking the environment and climate into account. The growing global population’s increasing demand for food, water, commodities, housing and mobility cannot be met with conventional patterns. So KfW is investing in a sustainable development trajectory. For example, it promotes forest conservation as forests play a key role in protecting the climate. KfW supports reforestation programmes such as the ones in Madagascar or Vietnam. It sees the potential of agro-forestry systems to balance forest use with conservation. And KfW supports compensation programmes that provide incentives for forest conservation.

Another important concern at KfW is global marine conservation. The world’s oceans are not just a significant carbon sink, they also provide a source of food and income for billions of coastal inhabitants. Charitable trusts and initiatives co-founded by KfW like the Blue Action Fund (BAF) or the Clean Oceans Initiative (COI) promote conservation areas, sustainable fishing, environmentally friendly tourism and fighting plastic waste.

Despite all efforts to curb climate-damaging gases, the Earth’s temperature will continue to rise. So in addition to climate-friendly development, adjusting to climate change is also a focus area. Here, KfW is investing in projects such as coastal protection in Tunisia to keep the land from being flooded.

The burning of fossil fuels is a one-way street that is not sustainable. Experts around the world are searching for alternatives, and investments are being made in new technologies to cover the growing energy requirements with climate-friendly sources. This is where many developing countries are at an advantage; they are not yet fully exploiting the use of the enormous renewable energy resources they have. KfW wants to drive transformation forward and is actively financing infrastructure to tap into these renewable energy sources. It is financing projects like the largest solar power plant in Africa to date in Ouarzazate, wind farms in Egypt and geothermal power plants in Indonesia and Kenya.

But power is not always produced where it is needed. So adequate networks and storage capacity are required. In India, KfW is supporting construction of “green corridors”, which are expansive routes used to transport power to the country’s economic centres. But the most environmentally friendly energy is the power that is not needed in the first place. So KfW is also focusing on supporting energy efficiency. There is much untapped potential here. KfW supports projects like the one in Mexico where eco-houses for poorer families are under construction – they have since become home to over 100,000 people.

The energy transition is expanding; it focuses on power production, but also on how energy for heating, cooling and mobility is used. It also focuses on making sustainable energy available for other applications like e-mobility or artificial fuels (power-to-X). The transport revolution is closely tied to the energy transition. So on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ), KfW is promoting electric mass transportation like underground and suburban railways, for example in Brazil, Tunisia and India, but also non-motorised transport such as in the form of bike paths in South Africa. KfW believes that creating sustainable mobility systems that seamlessly coordinate transport methods and integrate them in targeted urban planning is one of the most urgent tasks in the coming years.